Forgive me Points Guy for I have sinned. It has been two days since my last award booking.
Today’s topic of profound importance is committing heresy by booking awards that your own valuation calculator does not support. After devaluation after devaluation after devaluation, points are becoming as worthless as Uncle Vito’s promise to pay up on his wager of MSU reaching the Final Four. Although TPOL preaches Shut Up & Book!, even I, the points pastor is mindful to keep a stash for fear that I won’t be approved for another card.
Putting the finishing touches on the greatest trip I will take (see Tahiti Triumph) since the $77,000 Trip Heard Round the World, required booking hotel rooms in Dubai, Shanghai, and Tokyo. I’ve stayed at the Conrad Tokyo, the Park Hyatt Shanghai, the Waldorf on the Bund Shanghai, Le Royal Meridien Shanghai, the Hyatt on the Bund Shanghai, and the Golden Tulip in Dubai (before TPOL was TPOL). All of those are great choices but I wanted to stay in new places this time.
I was interested in the following properties:
- The Waldorf Astoria Dubai Palm Jumeirah
- The Andaz Xintiandi Shanghai
- The Grand Hyatt Shanghai
- Twelve at Hengshan, a Luxury Hotel Shanghai
- Hyatt on the Bund Shanghai
It really doesn’t get any better than that. Well, it could if the redemptions weren’t teetering on the edge of compromising TPOL’s Points And Cash Math. Points + cash makes sense when the value of the points + the dinero is > the cost of the room. The same equation can be used for a points only reservation but I prefer the cash n points method for stretching my balances during these dark deval times.
Solving this mathematical is not as easy at it appears to be. Here are some issues I have to address when weighing if making a reservation is a good idea or bad one.
1. Room Rate: The first question and most important question that was not answered TPOL’s Points And Cash Math is what price for the room should be used in making the calculation. Is it the historical rate of the room published by websites like TripAdvisor? Is it the flexible rate price that allows cancellations at anytime? Is it the book well in advance price where the date to make changes has already past?
2. Upgrades & Amenities: The next question that must be answered is whether to factor in amenities when determining the threshold price of the room. Should the math be based on the breakfast rate? Should it be based on the suite rate provided when a DSU has been confirmed?
3. Duration: Making matters more complicated is factoring the duration of the stay. For example, in Dubai, I’m not even staying the night en route to Shanghai so I could skip the hotel altogether. I’m there long enough that a room would make my layover more comfortable but it certainly is not necessary i.e., there is a Four Points that would do the job for less.
4. Annual Fees: Adding in the cost of the annual fee for the hotel card that made the free room possible is a variable that often gets overlooked. In my Dubai example, this is the free night from spending 10k on the Hilton Reserve card which has an annual fee of $95. Another issue is expiring certificates. If the stay certificate isn’t used, it is forfeited entirely.
5. Valuation Calculator: There is the question of valuation. In the event your personal valuation is inflated more than the industry (TPOL likes to use 3 cents for SPG, 2 cents for Hyatt), is it permissible to rationalize lower values utilized by leading writers in the field like TPG?
6. Intangibles: This math becomes more convoluted when additional variables are included. One externality is the utility gained from staying at the hotel i.e., the unique experience of staying on the worst real estate development in the history of mankind. How are those World Islands coming along?
Now that the questions have been posed, the process continues by a multi-step value analysis.
The Initial Analysis: The Strict Interpretation of Value
1. Room Rate: The analysis should start with the advanced purchase rate. If it clears this hurdle then there’s nothing more to be done.
2. Upgrades & Amenities: Factoring in breakfast should never be used; it is cheating. Save suite upgrades calculations for the secondary analysis.
3. Duration: If the math based on your valuation of points is coming up short then only staying for a short duration goes into the ‘don’t book’ box.
4. Annual Fee: The Hilton Reserve card required spending 10k to get the free night bonus which was easy before but more cumbersome now. Incorporating the opportunity cost into MS on this card versus another would be an exercise in futility. The award has been realized and must be used before it expires. The relevant monetary factor is the annual fee of $95 which should be subtracted from the savings in the equation.
5. Valuation Calculator: Each person should have his own valuation calculator. SPG points are the most valuable for me (3 cents each) because TPOL’s best efforts for lobbying for Amex referrals from readers have yielded next to nothing. As such, I keep them close to my bosom. Hyatt points ( 2 cents each) will be harder to come by with Chase no longer lobbying for my business.
In the initial analysis, it is critical to use your own valuation.
6. Intangibles: This is not the time or place for deriving value from intangibles.
The Secondary Analysis: Rationalizing Redemptions
1. Room Rate Range: If the cash n points value is less than price for the advanced booking, then consult the flexible rate. That, practically speaking, is the rate that I consider to be the true rate because I’m rarely in the circumstance where I know what I’m doing in life. Write down the range of rates and take note of where your booking falls within those two.
2. Upgrades: At this point, it is acceptable to write down the rate for the lowest level suite upgrade. This works better for confirmed suites. Though it is probable that a suite will be offered for SPG platinums, for example, in Asia, it is not a guarantee.
3. Duration: A short duration will continue to make the award less appealing as there won’t be the opportunity to enjoy the hotel itself.
4. The Annual Fee: The annual fee continues to be a factor both in terms of the amount paid and the expiration of the free night award.
5. Valuation: It is time to start looking but not calculating what the experts believe a proper valuation for the points should be.
6. Intangibles: It is the Palm Jumeirah. How many times am I going to be in Dubai with an opportunity to stay there for free?
The Final Analysis: Making the Math Work
Ultimately the math has to work to prevent a case of buyer’s remorse.
1. Room Rate: All other things equal, the easiest way to see if the reservation should be made is to take the range of room rates and use the more generous valuation from factor number 5. If it beats the advanced purchased rate, there is a good case to be made that the redemption should be made. If it does not then it’s time to scan through the factors for the final time.
2. Upgrade: At this point, the points aren’t perfect but the suite appears to be. Score one for the ‘book’ column.
3. Duration: Curiously, at this stage, duration starts to become a reason to book the premium hotel. The ‘I’m only here for one night, #ballsohard’ mentality may take over. Having been methodical up to this point, it would be foolish to score duration in the ‘booking’ column. At best, the efforts to rationalize make this a tie.
4. Annual Fee: There’s a reason annual fee is fourth. It becomes decreasingly critical. It is a sunk cost that has already been paid. Perhaps better planning in the Keep vs. Cancel Matrix spreadsheet should have been contemplated but now there’s a solid deadline with a redemption that has to be used. Score another for ‘make the booking’.
5. Valuation: TPOL consults TPG for valuation. For some reason, if he says that a Hyatt point is worth 1.8 cents, then the guilt of reducing it from TPOL’s 2 cents is offset. On the other hand, if you’re searching Reddit forums hoping that someone will give you the number you want to hear then you are more compulsive than TPOL.
6. Intangibles: The points game may not be around forever. The game is under attack from all fronts. The only thing worse than buyer’s remorse is idle regret.
Conclusion
Rationalizing the use of points for bad redemptions is a mortal sin that will only bring short-term pleasure. Once those vices have been enjoyed, the path down to peasant class hell will be anything but. Concurrently, it is the Waldorf Dubai Palm Jumeirah, it is the Grand Hyatt Shanghai, it is the Hilton Tokyo Shinjuku, so why not book it?
